Investor Signposts: Week Beginning March 22

Australia

Monday March 23 – CBA business sales (February) – Measures sales with credit/debit card data

Tuesday March 24 – Weekly consumer confidence – Timely update on consumer sentiment

Tuesday March 24 – Speech by Reserve Bank official – Malcom Edey participates on a panel

Wednesday March 25 – Financial Stability Review – Semi-annual report from the Reserve Bank

Thursday March 26 – Population data (September Qtr) – Population growth has slowed

Thursday March 26 – Finance & Wealth (December Qtr) – Wealth is at record highs

Overseas

Monday March 23 – US Existing home sales (February) – Closely-watched regional economic survey

Tuesday March 24 – US Consumer prices (February) – A 0.1% lift in the core rate is expected

Tuesday March 24 – US Home prices (January) – Prices are up 5.4% over the year

Tuesday March 24 – US Richmond Fed survey(March) – Influential regional survey

Tuesday March 24 – US New home sales (February) – Little change is expected

Tuesday March 24 – “Flash” manufacturing (February) – Covers US, China & Europe

Wednesday March 25 – US Durable goods (February) – Measure of business investment

Friday March 27 – US Economic growth (December Qtr) – A “final” reading of 2.4% is expected

Variety of economic indicators, but Reserve Bank in focus

Quiet week ahead in Australia

– Similar to the past week, so-called ‘top shelf’ economic indicators will be virtually non-existent in Australia in the coming week. The highlights are the latest population and wealth figures to be released on Thursday.

– In Australia, the week kicks off on Monday with the latest CBA Business Sales indicator. This measure uses data on credit and debit card transactions to gauge changes in economy-wide spending. In line with retail sales, trend growth in economy-wide sales has been slowing.

– On Tuesday, Malcolm Edey, Assistant Governor (Financial System) at the Reserve Bank participates in a panel discussion at the ASIC Annual Forum. Investors will be interested in any new comments on so-called macro-prudential controls on the housing sector – that is, tools designed to minimise “irrational exuberance” stgeloping in the housing market.

– Also on Tuesday, ANZ and Roy Morgan issue the weekly consumer sentiment reading. Few can say that Aussie consumers are downright gloomy. But few could also claim that consumers are brimming with optimism. Sentiment is just OK, making it hard to generate momentum in the economy.

– The bi-annual Financial Stability Review is released by the Reserve Bank on Wednesday. As is customary, the Reserve Bank Board has been briefed on the Financial Stability Review with some of the key findings noted in the minutes of the last Board meeting. And most of the interest in the Financial Stability Review will centre of comments on the housing market.

– On Thursday, the Bureau of Statistics will release two publications. The first covers demographic changes over the September quarter while the other publication is entitled “Finance and Wealth” for the December quarter.

– Population growth has slowed over the past two years. At December 2012, the population was growing at a 1.78 per cent annual rate – the fastest in three years. But currently annual population growth stands at 1.58 per cent – the slowest rate in 2½ years. Understandably in-bound migration has eased in line with slower growth of the economy.

– Despite the slowdown, population growth in Australia is still high on a global scale, highlighting Federal Treasury’s PPP policy to address the coming challenges of an ageing population. The desire is to increase population growth, workforce participation and productivity growth.

– The “Finance and Wealth” publication, also for release on Thursday, will show – amongst other things – the state of household wealth (most likely at record highs) as well as data showing the proportion of our bond and listed equities markets held by foreigners.

Housing indicators dominate in the US

– In the United States there is the usual bevy of indicators to guide investors over the coming week. Housing indicators dominate as well as consumer prices, manufacturing and economic growth.

– The week kicks off on Monday with data on existing home sales and the national activity index. Economists tip a 2.5 per cent lift in home sales.

– On Tuesday, data on consumer prices is issued alongside figures on home prices, new home sales, the Richmond Federal Reserve index and the usual weekly data on chain store sales.

– The core rate of consumer price inflation (excludes food and energy) is tipped to have lifted by 0.1 per cent in February to be up 1.6 per cent over the year. For many, this indicates that the Federal Reserve doesn’t need to be in any rush in lifting interest rates.

– Also on Tuesday the so-called “flash” (or early) readings on manufacturing in March will be released in the US, China and Europe. The Chinese gauge stood at 50.7 in February – just above 50, so in “expansion” territory.

– On Wednesday, durable goods orders data is released. And on Thursday, the Markit “flash” reading on the US services sector is issued alongside the Kansas City Federal Reserve manufacturing survey as well as the regular US weekly data on new claims for unemployment insurance (jobless claims).

– On Friday, the “final” data on US economic growth in the December quarter is released. It is the “final” reading as “advance” and “preliminary” estimates of growth preceded it. Overall, the US economy probably expanded at a 2.4 per cent annual pace. Growth is expected to lift further over the year.

– Also released on Friday is the “final” reading of consumer sentiment for March. Again, there is a “preliminary” and “final” reading. In contrast to Australia, US consumers are reasonably chipper.

Sharemarket, interest rates, currencies & commodities

– There has been a lot of focus on the level of the Australian dollar. The Reserve Bank believes it is still too high. While the Aussie dollar has come down against the US dollar, it remains relatively high against the euro and Japanese yen. Still, this shouldn’t be a great surprise – the European and Japanese economies are struggling. The Australian economy may be under-performing, but it remains strong compared with other advanced nations – thus the 2.25 per cent cash rate when policy rates are close to zero elsewhere.

– Over the past year the Aussie dollar has fallen by around 15 per cent against the US dollar but risen 10 per cent against the euro. The Aussie is also down 2 per cent against the New Zealand dollar, down 5 per cent against the UK pound but is up almost 1 per cent against the yen.

– Since the start of 2015, 86 of 117 currencies monitored have fallen against the US dollar. Only 11 currencies have lifted against the greenback (and very modestly) while the rest are broadly unchanged. The Aussie dollar is ranked 86th, meaning it has actually lifted against 31 currencies over 2015 so far.

Craig James, Chief Economist, CommSec

Watch Investor Signposts video for the week beginning March 22, 2015